Whistleblower

If you think that today’s Wells Fargo is different from the old Wells Fargo, think again. Emily Glaser of the WSJ reports that Wells Fargo’s brokerage/investment advisory practice — its Wealth Management Unit — is being investigated by DOJ for improper sales practices. Hard to believe, isn’t it?

Please join the Chicago Bar Association Securities Law Committee on February 27, 2018 from 3-6 p.m. for three great panel discussions of what in securities law has changed and what has not during the first year of the Trump Administration while getting continuing legal education credits.

“It took Jennifer Sharkey more than eight years to get a trial over her dismissal from JPMorgan Chase & Co. A Manhattan jury needed only five hours to find the former wealth manager was fired illegally and award her $1.13 million in damages. Then, it took just an hour for a Manhattan judge to upend the verdict and send the whole case back to square one.”

Thank goodness for people like Susan Fowler, the whistleblower who revealed rampant sex discrimination and harassment at Uber. Life is not easy for those who are brave and strong enough to blow the whistle. We should take every opportunity to celebrate how we reap the benefits of whistleblowers. You can read Maureen Dowd’s article about Susan Fowler in the New York Times is available here: After leaving Uber, Ms. Fowler published a blog post describing the sexual harassment and discrimination she experienced at Uber. Ms. Fowler’s whistleblower account, available at the following address, details the wholly improper response of Uber’s HR department to Ms. Fowler’s reports. https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber

Two former regional presidents who oversaw Wells Fargo branches across Southern California, Reza Razzaghipour and Marla Razzaghipour, on Thursday filed a lawsuit in Los Angeles against Wells Fargo, according to the Los Angeles Times. The Razzaghipours, who were terminated in March, are suing Wells Fargo for wrongful termination, retaliation and defamation. They’re seeking damages of at least $50 million for among other things, loss of job prospects, emotional distress, depression and anxiety.

Whistleblower case dismissed as based on public info Earlier this month, the Seventh Circuit Court of Appeals affirmed the dismissal of a former hospital employee’s claims under the U.S. and Illinois False Claims Acts. The 7th Circuit ruled that the whistleblower failed to identify independent knowledge of information that materially added to the publicly-available information. As a result, the court found that the whistleblower was not an original source of the allegations in his complaint and affirmed dismissal of his False Claims Act (“FCA”) and Illinois False Claims Act (“IFCA”) claims. In Bellevue v Universal Health Services of Hartgrove, Case No 15-3473 (Aug. 8, 2017), a whistleblower brought claims against a psychiatric hospital that primarily served children with mental illness. The hospital had submitted false certifications to Medicaid on behalf of patients who were identified as being placed in a patient room when they had been sleeping on rollout beds until patient rooms were available. Neither the federal nor state governments chose to intervene in the case. The court determined that the false certifications, audits, and other documents contained all the critical elements exposing the fraud. These documents were sufficient information for the government to infer that the hospital knew that its Medicaid certifications were false when they were filed. The court differentiated this case from other cases where the publicly disclosed information was not sufficient to show knowledge of falsity. http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2017/D08-08/C:15-3473:J:Bauer:aut:T:fnOp:N:2007443:S:0

Government employees are eligible to recover awards under the SEC’s whistleblower program Generally speaking, if you are an employee of a federal, state, or local government agency, you may be eligible for an award under the SEC whistleblower program. But, you must satisfy two conditions. The first is that you not work for a banking or securities regulatory agency. The law prohibits paying a whistleblower award to an employee of “an appropriate regulatory agency.” Exchange Act § 21F(c)(2)(A)(i), 15 U.S.C. § 78u-6(c)(2)(A)(i). Exchange Act Rule 21F-4(f) defines an “appropriate regulatory agency” by reference to Section 3(a)(34), which in turn defines an “appropriate regulatory agency” as the Commission and any of the various banking agencies listed in the definition, including the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation. The second condition requires that you not work for the law enforcement section of your agency if your agency is considered “a law enforcement organization.” Exchange Act § 21F(c)(2)(A)(v), 15 U.S.C. § 78u-6(c)(2)(A)(v), and Exchange Act Rule 21F-8(c)(1), 17 C.F.R. § 240.21F-8(c)(1). Neither the Exchange Act nor the whistleblower rules define “law enforcement organization.” According to the SEC, the term is generally understood as having to do with the detection, investigation, or prosecution of potential violations of law. Exchange Act §24(f)(4)(B) and (C), 15 U.S.C. § 78x(f)(4)(B) and (C) (defining foreign and state law enforcement authorities as those that are “empowered … to detect, investigate, or prosecute potential violations of law”). This would probably bar anyone who works for the Department of Justice, FBI, etc. from being a whistleblower — since the entire organization would likely be deemed a “law enforcement organization.” But, you might be eligible if you worked for the Department of Education, HHS, CMS, or another regulatory agency that does law enforcement that is organizationally separate from where you work and that you have nothing to do with. The SEC is concerned about paying an award to a claimant who seeks to get around the potential responsibilities that the government agency (their employer) might have to investigate or otherwise take action for the misconduct. The SEC is not interested in making an award to someone who was just doing their job. Bottom line: If you are a government employee, don’t assume that you are not eligible to receive a whistleblower award. https://www.sec.gov/rules/other/2017/34-81200.pdf

Chinese authorities recently reported that two government officials for two northern provinces had falsified financial performance data in order to meet targets. “Good times or bad, China always seems to post numbers that meet the targets set by central planners,” Arthur Dong, a professor of international relations at Columbia University specializing in Chinese economic affairs told Pacific Standard Magazine. According to Kevin Tsui, an economics professor at Clemson University specializing in the Chinese economy, “local government has incentives to manipulate their financial data because local leaders’ promotion opportunities are related to these statistics.” “Producing the numbers that Beijing likes will always lead to promotions and career advancement within the party apparatus,” Dong says. “There is a ‘get what you pay for’ element to the incentive system that encourages provincial leaders to game the numbers.” But some see this report in a positive light. William Hurst, a political science professor at Northwestern University, says “I actually look at the fact that the central authorities are trying to crack down on this as a positive sign that China’s leaders want a little bit more transparency and more accurate reporting in the economy … This can help preserve some trust among investors—foreign and domestic—and temper panics that can occur in times of crisis.” https://psmag.com/economics/china-has-been-cooking-the-books

Want to know if your state has a false claims act? Check out the map available at http://taf.org/states-false-claims-acts Thanks to the Taxpayers Against Fraud Education Fund for publishing this summary.

We now have brain research showing how the more you lie, the easier it gets. The researchers (including Professor Dan Ariely) used functional MRI scans to show how self-serving dishonesty increases with repetition. The findings uncover a biological mechanism that supports a ‘slippery slope’: what begins as small acts of dishonesty can escalate into larger transgressions. https://scholars.duke.edu/display/pub1150337